NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke said Sunday that lessons learned from the recession and the financial crisis will help make the economy stronger than it was before the crisis.

The Fed chairman answered questions from members of the public as well as moderator Jim Lehrer of PBS at a town hall event sponsored by the Federal Reserve Bank of Kansas City, Mo.

"The silver lining in this whole thing is that people are starting to save more, since they saw what happened with 401(k) investments," Bernanke said. "People are adopting good habits, so not only will we will be back on track, but the economy will be stronger than it had been before this started."

The Fed chairman also noted that government regulators are working to ensure that such a crisis can never happen again by addressing the issue of too big to fail and lobbying Congress to pass a regulatory reform bill.

"I don't think we'll ever completely eliminate financial crises, but there are ways to make sure one this severe never happens again," Bernanke said. "We need to have a council or group of regulators that look at the financial system as a whole and look for gaps. And 'too big to fail' has to go."

Bernanke suggested instituting a new kind of bankruptcy process for big non-bank financial institutions similar to what the Federal Deposit Insurance Corp. uses for banks.

"Sell [a large corporation] off, let it fail, but ensure that the whole financial system is not brought down with it," he said.

Slow recovery: Facing questions from many concerned consumers, Bernanke sought to assure the audience by noting that "recessions happen." Though he said this is the worst recession since the Great Depression, he also said that, like all prior economic downturns, this one will end too.

Bernanke said the economy is beginning to show signs of improvement, but recovery will be gradual. He said gross domestic product will likely rise by the end of the year into 2010, but job growth will lag. He conceded, "economic forecasts make weather forecasts look like physics," but said unemployment will top out above 10% before falling back in the second half of next year.

Taking heat: In addition to questions about timing of the recovery, Bernanke also took heat from some small business owners and people who had lost their jobs about how the Fed handled the crisis.

Many questioned whether it was problematic for the Fed to reward banks' irresponsible behavior by bailing out financial institutions. But Bernanke said he was left with no choice.

"Nothing made me more frustrated than having to intervene in a couple cases where wild bets threatened to bring down the financial system," he said. "But I was not going to be the Federal Reserve chairman who presided over the second Great Depression."

Though the Fed chairman mostly stood by the Fed's decisions, on the subject of subprime lending regulation, he said the Fed deserved some criticism.

"We were late in addressing the subprime lending problem," Bernanke admitted. "We put together a set of rules that apply to all lenders, and I hope that solves the problem, but those weren't in place early enough. We have to take some heat for that, I think that's appropriate."

He declined to say outright that he opposes efforts by Congress and the Obama administration to create a separate consumer financial protection agency. But he said there were drawbacks to it, including possible "duplicative efforts" in monitoring. And he defended the Fed as being "very active" in the last three years on the consumer protection issue.

Bernanke was even more defiant about a congressional proposal to audit Fed monetary policy and actions. He said politics need to remain separate from the Fed to ensure that inflation and financial stability remain in balance.

"It is incredibly important that the Fed maintain its independence -- it is so critical to the stability of economy," Bernanke said. "I don't think people realize that Congress' bill would allow the Government Accountability Office to be able to audit Fed decisions. That's not congruent with independence."

There were lighter moments at the town hall, though.

When one particularly well-prepared questioner asked Bernanke a question about the Great Depression, Bernanke said, "I see you've read my book. I'm happy to autograph it for you after we're done."

And when one audience member asked if he had any investing tips, Bernanke warned that he wasn't licensed to do so. But he said to diversify investments between stocks and other instruments, and he added: "Don't try to time the market. There might be a couple of people in the world who can time the market, but if there are, they're not telling you."

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